In a crisis with my business partner - business about to collapse

That isn't an idea to propose. That is the way it is actually supposed to work. Don't just ask him if he likes the idea, tell him that is how it has to be done going forward.

Look, one day you are going to decide that you don't need to do this either. You can hire someone to do a lot of what you are doing and instead of putting in 3 hours a day you might put in 2 hours a week. At that point, the people you hire become business expenses just as you are currently a business expense. You will give up a bit of salary and reduce your dividends in return for getting your time back.

You need to have all of this in place for when that day comes. You need to understand how salary and dividends and taxes and such work. He's the tech, so this is your job. He already agreed that running the business is your job so you just tell him it's going to work going forward.

Also, you better be honest about all of this. Don't think that you can inflate your hours to take more in salary and give him less in dividends. There are some rules about how much you can withdraw in dividends in comparison to your salary. These are in place because there are different tax rates on the two types of pay. Your partner will need to understand this too because it is going to give him an incentive to actually get back to work.

You two really do need to sit down with an accountant to learn the basics, then hire a bookkeeper to keep you legal going forward. You also need to sit with an attorney to explain where you are at and get the proper paperwork together to protect yourself, protect him and protect the business.

This is going to cost you some money but it will save you a ton of grief down the road. Get it down now before it becomes too expensive to be wrong. You are in on a good thing and it'd be a shame to lose it all because you wouldn't spend a few hundred to talk with an expert or two.

/r/smallbusiness Thread Parent